Millicom to consolidate before going for more M&As

Emerging markets telco Millicom will seek to consolidate its recently acquired assets in Central America before looking to acquire more, COO Esteban Iriarte told BNamericas.

"Our strategy has always been measured growth, based on acquisitions that help us better serve our customers but not to acquire or grow for the sake of it," Iriarte said.

In October, the Luxembourg-headquartered company acquired 80% of Panama's leading cable company Cable Onda for US$1bn and in February this year Millicom picked up Telefónica's operations in Nicaragua, Costa Rica and Panama for US$1.7bn.

"We are an important operator and want to continue growing. But we have to take a breather, consolidate what we have and then continue our path. When you look at our trajectory we have always grown both organically and inorganically, consolidate and then do it again," Iriarte said.

CENTRAL AMERICA

Commenting on Central America, the COO said Millicom is facing a new competitive scenario in the region.

In January, Telefónica sold its El Salvador and Guatemala units to América Móvil.

"We're starting to operate in Nicaragua, Costa Rica and Panama as a mobile operator. The fact that Telefónica is exiting those markets is significant," he said.

"Some of those markets had three or four operators and due to the market size that number of operators was unsustainable."

That situation "caused challenges for investment, consumer expectations that weren't met, a lot of problems. We think that the market is undergoing a process of rationalization. The future is in our hands and as long as that results in something positive for the consumer then that is the right path to take," Iriarte said.

In Costa Rica, Millicom was previously only present as a cable operator. There are three main cable operators and three mobile players in the country – Claro, Telefónica and state-owned ICE.

In Nicaragua, there were only two players – América Móvil's Claro and Telefónica's Movistar brands.

Panama is the most competitive market with Claro, Movistar, Cable & Wireless Communications and Digicel.

COMPETITION WITH LIBERTY

Millicom was approached in January by Liberty Latin America as an acquisition target but negotiations were abandoned a week later.

Liberty, which spun off from Liberty Global last year and which owns the operations of Cable & Wireless Communications (CWC) in 16 markets in the Caribbean and Panama as well as Liberty Puerto Rico and VTR Chile, is also on an M&A drive and acquired cable operator Cabletica last October.

Asked about the potential rivalry between the two companies to position themselves as the third major telecoms group in the region after América Móvil and Telefónica, Iriarte said: "We don't have a lot of overlap with them, we compete in a few countries in Central America" as an operator and B2B services provider.

"They are a strong player but we are more focused on ourselves. That is the way we can get a competitive advantage. We compete with a lot of operators, local and multinational," Iriarte said.

PANAMA

The acquisition of Cable Onda was seen as strategically key for Millicom as it connects the telco's footprint in Central American with Colombia and its other operations in South America, which are Bolivia and Paraguay.

"This means leveraging synergies in infrastructure but also Cable Onda's knowledge and experience in B2B for clients outside the country," Iriarte said.

He underscored the importance of Panama as a logistical and financial hub.

The acquisitions of Cable Onda and Telefónica Panama give Millicom the country's two largest cable and mobile operators in terms of market share.

Liberty is also strengthening its operations in Panama and last month announced it would install its regional operations hub in the country.